From the Editor
How to Avoid the Cash Flow Rollercoaster
Managing cash flow is the bane of every freelancer's existence.
I recall this tongue-in-cheek statement made by a salesperson friend: "One day you have chicken; the next day you have feathers."
He was referring to sales, but the same holds for freelancer cash flow — one month, you have more than enough, and the next, not enough.
How do you manage uneven income? Aside from listening to the podcast with my guest Urban Adams, a financial investment advisor, here are some tricks of the trade that have worked for me and many others.
Always Be Marketing
You may recall the line from the 1992 film Glengarry Glen Ross spoken by Alec Baldwin's character Blake: "Always Be Closing." You may also remember the quote from advertising tycoon David Ogilvy: "When times are good, you should advertise; when times are bad, you MUST advertise."
My wife Amie, a freelance paralegal, is the perfect example of this principle. Even when she has enough business to keep her busy 30+ hours per week, she still sends letters to area attorneys, letting them know about her services.
The lesson: Never rest on your laurels — always be marketing.
Make Contract Payment Terms Clear
Decide what works best for you regarding payment for services and clearly state the terms in your contracts. Discuss those with the client. If they sign the contract, they understand they are obligating themselves to those terms. But it's up to you to determine a payment arrangement to keep your cash flow level.
Set Aside Funds for Estimated Taxes
My podcast guest Urban Adams clarifies that you must set aside funds in a separate account exclusively for taxes and pay the estimated amount quarterly. What does that have to do with cash flow? Everything. Waiting until the end of the year to settle your tax debt will put a massive dent in your income.
Save for Slow Months
Not only should you set money aside to pay taxes, but when business is good, you should also save money to prepare for slow periods (and there will be slow periods).
A proverb says, "[I]n the summer, ants gather and save all of their food. So when winter comes, there is plenty to eat." That's good advice for us humans, too.
Keep Track of Your Cash Flow
It makes sense to keep tabs on income and expenses. For years, I have used Freshbooks for invoicing and expense tracking. However, I am considering switching to Quickbooks for monthly bookkeeping. It's not something I'm particularly good at, but it's a necessary step if I expect to manage cash flow effectively.
Separate Personal and Business
A dedicated business bank account is the best way to track cash flow. Enough said about that.
Make It Easy for Clients to Pay
Have you ever waited anxiously for the postman to arrive, hoping a check was in the mail? Remember getting that sinking feeling in the pit of your stomach when you find it didn't come?
I determined long ago that paying by check would not work for me. I only take payments online or via electronic bank transfer and advise other freelancers to follow suit.
Offer a Retainer Option
I have one retainer-based client relationship. I wish I had several because that is one sure way to make cash flow rock solid. I need to offer a retainer option when establishing client relationships — and you should think about it, too.
A lot of what you just read is common sense. But we can all use a friendly reminder from time to time, right? Below, I've included links to a few articles that provide additional cash flow management information.
How To Successfully Deal With Common Cash Flow Problems in Freelance Life
This article is an in-depth guide to freelancer cash flow management. It addresses common cash flow problems, such as heavy overhead, poor invoicing practices, and slow paying clients, then suggests several practical solutions.
Conquer Cash Flow Problems with These Four Tips
This article, from The Freelance Creative, a publication for freelancers, was written in 2015 but contains timely advice on managing cash flow.
The writer confessed, "As I sat there desperately calculating my finances, I realized that clients owed me over $9,000 for previous projects. My problem wasn’t income. It was cash flow."
- Track incoming payments
- Get paid faster
- Diversify your client base
- Pay yourself first
6 Ways Freelancers Can Get Paid
I said I don't take checks for payment. But that's one of the six ways this writer lists as ways for freelancers to get paid. Others include PayPal, credit cards, Cash App, accounting software, and electronic funds transfer.
The article also offers three tips for getting paid:
- Make it easy
- Invoice often
- Follow up
Simple Ways Freelancers Can Maintain a Healthy Cash Flow
This article starts with this line: "There are numerous benefits to being a freelancer but a guaranteed monthly salary is not one of them." No truer words have ever been spoken.
In addition to some of the same tips you see in the other articles, three are unique:
- Forecast earning requirements
- Analyze data quarterly
- Raise rates accordingly
"With careful planning and the implantation of simple strategies, you can quickly improve the health of your freelancing cash flow."
Strategies to Improve Freelancer Cash Flow
This article — a guide to cash flow management — kept showing up as the number one return in many of my Google searches, so I figured that if Google likes it, maybe you will too.
Podcast Interview: Urban Adams, Investment Advisor, Dynamic Advisor Solutions
My guest on this episode of Freelancing After 50 is Urban Adams, an investment advisor with Dynamic Advisor Solutions. We address a topic of concern to every freelancer: managing uneven cash flow.
Urban also discusses setting aside funds for lifestyle planning, paying taxes, and investing for retirement. If managing cash flow and other finances is important to you, listen now.
Another Way to Manage Cash Flow — Send Gifts to Clients
Recently, I received a nice surprise — a pecan pie showed up at my door. It was a gift from a client thanking me for noticing that their website was down.
The client used Postal.io, a marketing platform that includes gifting, direct mail, and swag. More than a 1,000 options are available, including pecan pies!
Why do I list it as a way to preserve cash flow? Because surprising clients with unexpected gifts is one way to keep them!
Uninsured? Save Big Money on Prescriptions
I'm sure you know who Mark Cuban is. But one thing you may not know is that he is the co-founder of Mark Cuban Cost Plus Drug Company, a discount online pharmacy that every uninsured freelancer should know about.
Why he wanted his name in the company title, I can't answer, but what I can tell you is that the prices he offers for prescription medications beats anything you will find elsewhere.
Cuban explains the company's mission this way:
"We started Mark Cuban Cost Plus Drug Company because every American should have access to safe, affordable medicines."
For example, I'm a type 2 diabetic. If I had to pay retail for Metformin, the cost for a 1000mg 90-day prescription would run in excess of $100. The Cost Plus price: $5.70. A 30-day supply of 30 mg Pioglitazone HCl, the generic for Actos, would cost over $70. Cost Plus price: $6.60.
Please understand, I am not being paid to endorse this company. Just knowing how much my meds would cost if I were uninsured motivates me to tell others.
Businesses Prefer to Hire Freelancers in Uncertain Times
They say all news is bad news. Well, not in this case; at least, not if you're a freelancer.
Bloomberg reports that as more companies announce hiring freezes and layoffs, 78% are more likely to turn to freelancers as a stopgap.
“A lot of companies are contemplating doing cutbacks and layoffs ... They view independent talents as a variable expense that they can scale up or down as needed, without any strings attached.”
So, maybe companies consider us a commodity, but take advantage of the opportunity while it lasts.
10 Best Careers for Remote Freelance Jobs in 2022
The beauty of working remotely is that we can (work remote, that is)... from the beach, the mountains, a city, small town... internationally... wherever. These are the top ten jobs that facilitate that freedom, according to GoBankingRates.
5 Marketing Tactics for When Business Is Slow
I said "always be marketing," especially when business is slow. Here are five things you can do to keep occupied during downtimes.
Chipotle's 'Water' Cup Candle Makes Fun of People Who Sneak Drinks
Chipotle has produced a limited-edition lemon-scented "water cup" candle to poke fun at people who order water then fill the cup with other drinks, like lemonade.
It's already sold out, but enterprising people are selling theirs on eBay for as high as $90. (The candle retailed for $28... enough to recoup the cost of a few cups of pilfered lemonade.)
I would love to connect with you via social media. LinkedIn is where I hang out mostly. Also, check out the Freelancing After 50 website, podcast, and online store featuring "greypreneur" products like t-shirts, caps, and tote bags.
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